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How to Sell a House

When you’re interested in finding a place to live, you’ll first have to get rid of the house that you already own. In some cases, this can be easier said than done. If you are interested in selling your house, there are a number of steps that you’ll need to complete. Here are the basics of what you need to do to sell your house:

Choose the Right Price

The price that you choose to list your house for will have a lot to do with how successful you are at selling it. Do a little bit of financial planning at this stage so that you can figure out how much you need to charge for the house. Otherwise, you might end up pricing the house too high so that others are turned off. If you end up pricing it too low, you’ll end up leaving money on the table. If you are working with a real estate agent, they will be able to do some research to help you figure out how much you should list the house for. They’ll base it on what other houses in the area have sold for recently.

Getting the House Ready

When you are trying to sell your house, you need to make it look immaculate. Go through the house and pretend that you were looking at it as a buyer. What would turn you off? What things would you notice about the house? Clean the house and make it look new again. You might need to touch up the paint, clean or replace the flooring, and make the outside look good. Think about the curb appeal of your house and what things need to be changed to make it look better.

Marketing

Once you have the house looking good and ready to sell, it is time to start marketing your property. If you work with a real estate agent, they will be able to market it for you with a combination of online promotion and networking. If you are doing it yourself, you’ll have to get the word out about your house. Create some flyers, list it online, and do everything that you can to get people to look at it.

Once you start having people look at the house, it’s all about finding the right person that matches up well with your home. If you are lucky enough to find a match, they’ll make an offer and buy the home.

The Ins and Outs of High Yield Savings Account

For individuals who have extra money that they want to put somewhere, a high-yield savings account may be an option that some should consider. With a high-yield savings account, there are some benefits that savers can realize compared to using other accounts. At the same time, there are a few problems that you may have to get used to with this type of account.

Higher Interest Rates 

One of the advantages of using a high-yield savings account is that the interest rates are higher than what you could get from a regular bank account. If you just put your money into a regular savings account, you may receive a very minimal amount of interest on your deposit. With a high yield account, you’ll be able to sometimes earn double or triple the rate that you could earn from a regular savings account. If you’re looking for good rates from a high-yield savings account, a Discover Bank savings account may be one to consider.

Money is Liquid 

Another benefit of putting your money into this type of account is that your assets remain liquid. You can take money out of your account at any point, based on your financial needs. By comparison, if you took money out of a CD, you would probably have to pay a penalty for taking your money out before it matured.

No Guaranteed Interest Rates

One of the potential problems of putting your money into a high-yield savings account is that the interest rates are not guaranteed. If you put your money into a CD, you could get a guaranteed interest rate for a certain amount of time. With the high-yield savings account, the bank can simply change the interest rate at anytime, and there’s nothing you can do about it.

Limited Transactions 

Although having your money in a high-yield savings account keeps your money liquid, there are typically limits on the amount of transactions that you can make with your account. For example, you might only get six transfers per month from your account. This limits what you can do with your account overall.

The high-yield savings account is considered to be a safe investment because it is backed up by the FDIC, and it provides investors with an easy way to access their capital when they need it. If you are considering putting your money into this type of investment, just make sure to read the fine print first.

The Deception of Easy Money

Drastic financial measures can look pretty inviting when you are down to your last penny. All of the hokey, clichéd commercials that you easily ignored when you are in good financial health start making complete sense all of a sudden.

This is exactly what certain unscrupulous companies in the financial services industry count on. Their bottom lines based on your fear.

There are certain actions that might look very inviting When you are in financial trouble, but they are actions that you should never take. This article will list a few of those drastic financial measures to stay away from.

1. Entering a Credit Consolidation Program

Credit consolidation programs are the worst thing to happen to a long-term credit score since bankruptcy. Many credit consolidation programs are completely in the hands and the pockets of creditors. They have no incentive to help you lower your monthly payment for your long-term principal payments. Many of them are quite unscrupulous in their methods. Do not be suckered in by a program that can ruin your long-term credit score.

2. Choosing to Refinance Your Mortgage 

Though a mortgage finance may look good at current rates, the truth is that those teaser rates are there to sucker you into a fool’s mate. Banks and other lending institutions are sitting on more money than they have ever had before. They have no reason to offer the “historically low interest rates” that they constantly advertise in the wake of the Great Recession. They do have a reason to fool you into thinking that you can refinance for less money than you pay for your house now. It is simply impossible to do.

3. Taking Out a 401(k) Loan

The first thing that they teach the financial sharks in shark school is never to trade long-term benefits for a short-term emergency. This is exactly what a 401(k) loan does to your finances. You are taking money away from yourself in the future to pay off something in the present. Therefore, you lose the money in the present and in the future. This is the very definition of bad personal finance. Find another way to get the money that you need to pay off short-term emergencies.

You may ask what the real alternative is if you are in financial trouble. The prepaid card is one of the most efficient ways to bring yourself out of short-term debt and build your long-term credit score. If you pick the right prepaid card, you can safely turn your financial situation around without sacrificing your long-term financial safety.

How Can Supplemental Income Cost Someone Financially?

It’s one of those age old adages that time is money. Whenever people lose free-time in their lives it can take a toll on them financially, mentally, physically, and even emotionally. And although those who seek out second and third jobs do so to get some supplemental income, people usually only think about the financial gain that comes with additional employment.

It’s like the person who has unlimited talk and text on their phone, but doesn’t know how to send texts.  How is the unlimited texting beneficial to that person? Wouldn’t the person be better off with a prepaid cell phone? What good does having extra income do for a person if they have no time to manage their money, pay their bills, or enjoy their hard earnings? People can end up spending additional time and money having to find someone else to manage their money, Supplemental earners all to often feel like the needle-in the-haystack searching for time to do everyday things.

Because recent employment trends are showing that around 7-8 million people hold multiple jobs, there is definitely a need for people to feel comfortable working so hard. While working additional jobs can provide greater financial freedom, the chance to try out a new career, and more discretionary income to spend on holiday shopping, etc, it can come with a steep price.

Supplemental income earners need to take into consideration their commuting costs. It is important to find supplemental employment that is close to the full-time job’s location. If you have to spend additional time and money driving to other jobs, then you have to spend too much money on gas. Besides the additional gas expenses, you will have to deal with more wear-and-tear on your vehicle. It might be a better option to consider additional work opportunities that can be completed at home.

Besides gas and other commuting expenses, often second and third jobs require uniforms or the purchase of new clothing and shoes. Some jobs will require educational expenses such as certificates, office supplies, or additional insurance.

This means that people who do personal training, yoga instructing, etc, on the side, need to compare their rate of pay with the expenses. If the expenses are going to cost more than the pay, then working the additional jobs are not worth the time and money.

Supplemental income working professionals need to also make sure they are properly withholding taxes for each job taken. Most temporary, freelance, self-employed, and seasonal jobs will require the individual to complete quarterly estimated tax forms.

Those not aware of these requirements can find themselves in trouble with the IRS, which is no good. While filling out work-related tax deductions can make up for the costs of employing a professional to help with completing quarterly taxes, it depends on the individual situation.

Also, if you find that you are struggling to find the time to pay bills on time, then you need to reconsider working additional jobs. It’s always a good idea to sign up for automatic online bill payments, especially for necessities like the mortgage, car, and utilities. Another essential thing to consider is making sure that you only live off the full-time employment.

Always try to use the supplemental income to pay off existing debt, save for retirement, plan a vacation, or do some holiday shopping. This way if you lose the second job or something, you still have the money to pay your bills.

The bottom line is that while supplemental income workers is a trend here to stay, the disadvantages of working multiple jobs sometimes outweigh the benefits. Working multiple jobs can put you in a physical, mental, emotional, and financial mess. And it comes at no surprise that not being able to find work-life balance now can negatively effect your relationships with family and friends later down the road.

Overinsured, and feeling good about it

When I was five years old, we had a house fire. (more…)

Redfin Review: A Personal Experience Buying a House with Redfin.com

My wife and I started looking for houses over one year ago. Initially, it was fairly informal, just looking at information online. I mostly stuck to Zillow.com and a few local realtor sites. Then one of my coworkers, who was also looking for a house, mentioned Redfin.com. An odd name, I thought, but worth checking out.

I was really impressed with their online interface. Zillow gave a good amount of information but was frustratingly slow. Redfin was fast, gave lots of good info, and was easy to filter. So I started using it more and more, including to scout out open houses.

Redfin-new-LogoAfter a few months of open houses, we decided to get more serious about finding a house. I considered using Redfin, but I was hesitant: Surely they couldn’t provide as good service as a “real” broker could, right? My wife and I both knew pretty much exactly what we wanted, and spend most of our lives on the internet anyway, but we still thought we might miss something by not using a traditional broker. Boy were we wrong.

We called a broker we met at an open house, and started looking at houses with her. It was a big disappointment. We wasted time at a lot of terrible houses, and felt extremely pressured towards certain ones. She would also say things like “Well if this is the house you want I would make an offer above the listed price just to make sure because it’s going to go quick”, and then I’d notice 6 months later the house went for 15% below its listed price.

Part of the problem was that this broker just didn’t seem to understand what we wanted. I was getting daily emails from Redfin with new houses, which I’d look at before work in the morning, usually dismissing all of them. And yet later that week I’d get an email from our broker excited about the exact same houses I had quickly dismissed.

After a few months, we decided to “break up” with our realtor and give Redfin a try. I placed a request to see a house we had wanted to look at that went off the market, but had just come back on. Literally five minutes after I placed the request, I received a call from the local Redfin tour coordinator, and we scheduled a tour in two days. I was very impressed with how prompt they were.

On our second trip out with Redfin, we found a house that we decided to place an offer on. Filling out the offer form on the website was a bit nerve-wracking, partially because they ask you how much you want to offer – something that is normally suggested to you by your agent. Redfin did provide good tools and guides on their website though for determining a good offer price though. We heard back fairly quick from Hannah, one of the main Redfin Boston agents.

The experience of putting together the offer went pretty smoothly, though I did feel like I could have used a little more guidance when it came to the offer price … I almost felt as though Redfin wasn’t allowed to suggest a price, though I don’t think that is the case.

In the end, this particular house fell through due to a terrible inspection.

Over the next few months, we worked with Madeline, an excellent Redfin tour agent. We loved that she never ever pressured us towards liking a house, and always gave her honest opinion when we asked.

Then one day late last summer we found our house, and gave Hannah a call on the way from the house. That night Hannah put together a comparative market analysis on the house and the next day helped us put together an offer. We received a much higher counter-offer, but this time Hannah gave us some very specific advice on how to respond which was very helpful.

We gave Redfin a thorough testing over the next few months. While our inspection went fairly smoothly, we did need to have a few contractors look at some issues that came up. Hannah was great at recommending people for the job, and also took care of making sure a Redfin agent would be present when the contractor showed up.

Then we had an issue with the appraisal, which was a nightmare in many respects, but Hannah and Redfin were there the whole time for us.

I think my only criticism of Redfin is that they only have three closing agents for all of Boston, and I often felt as though Hannah was overworked. For example, she seemed to be at a closing nearly half the days I called her! She did always get back to me the same day though. More importantly, she took as much time as was needed to explain things and help calm my frayed nerves.

I also got the feeling Hannah was a really good agent – she seemed to know a lot about the business. For example, when I mentioned we’d be using the bank’s attorney for our closing, she strongly recommended against it and gave me a list of lawyers. We went ahead with the bank’s attorney anyway and regretted it immediately. So we hired one of the lawyers Hannah recommended, who ended up being fantastic, and was absolutely essential when we ran into issues with the purchase & sale agreement and appraisal.

We finally closed, which funnily enough was the first time we met Hannah in person. Then 10 days later, as promised, we received a check for over $4,000 from Redfin. I mention the specific number because I want people to know that you do actually get a non-taxable check from Redfin for the amount they tell you you’ll receive. We actually got paid to buy a house!

One note though on that commission refund: I mentioned earlier a house we put an offer on that fell through. The refund shown on that house’s detail page on Redfin showed a refun around $4,000, but after we placed the offer the fine print showed the refund for that house would have only been around $2200. This is because that house’s commission was 2%, while the one we purchased was 2.5%. Apparently Redfin bases their refund approximation, shown on a house’s detail page, on 2.5% even when that same page lists it as 2%. This seemed a little bit unfair, but since we did end up with a house with a 2.5% commission I was of course less bothered.

In the end, I wholeheartedly recommend Redfin to anyone who feels as though they have a good idea of what they want from a house, and who doesn’t mind spending time on the internet searching out houses.

Now that the check has cleared, I can even say that I would have gladly used Redfin even without the commission refund!

How to Buy a House, Part 2: What it Costs to Own a Home

I’ll assume that if you made it this far (this far being part one, which I suppose is really not that far at all), you’ve decided you want to buy a house. I’ll assume that you are buying a house for a good reason, and not just because you want to grill with your bro’s.

On that note, a quick tangent. I suppose I shouldn’t be going on tangents in the first paragraph of the first article on this subject, but this is important. I highly recommend you watch shows like House Hunters and Property Virgins so you can take notes of exactly why not to purchase (or avoid) a house. For example, is there horrific wallpaper in a bedroom? Guess what – you can strip it off! Don’t like the ceiling fan in the family room? It can be changed! Choosing which house to buy based mainly on the size of the margarita bar in the kitchen? Probably not such a great idea.

We’ll get more into the details of what to look for in a house later, but before that it’s important that you figure out if you can actually afford a house. In order to do that, you first need to understand the costs of owning a home.

It is absolutely, positively imperative that you calculate exactly how much all of the various parts of owning a home will cost you, and then decide 1) if you can afford a home at all and 2) what price range you can look at.

Let’s assume you are renting right now. Here are the costs you are concerned with as a renter:

  1. Rent
  2. Renter’s insurance
  3. Heat
  4. Electricity
  5. Water

Not much, eh? Some of you may only have (1), in which case I insist you get renter’s insurance immediately. It can cost, literally, a few dollars a month. It not only covers, say, your apartment burning down, but it also covers thefts from your person and also injuries that occur to others inside your apartment. Pretty important stuff for a few bucks a month.

Of course not everyone pays utilities when renting. Or you may only pay for electricity but not heat, or vice-versa. Also, some rental units charge for things like parking or a garage, so don’t forget about those if that situation applies to you.

Here are the costs of owning a house:

  1. Mortgage
  2. Homeowner’s insurance
  3. Property taxes
  4. Private Mortgage Insurance
  5. Repairs
  6. Heat
  7. Electricity
  8. Water

Mortgage

I know the term mortgage will be obvious to most people, but if not: Your mortgage is the big chunk of change you pay each month to the bank (instead of a landlord). Your mortgage payments go towards two things: Interest on the loan you take out to pay for the house, and payment for the house itself. The latter is called your principal. These numbers are always combined when talking about the mortgage.

Fun fact about mortgage payments: Say your mortgage payment is $1500 a month. The first year of owning a house, the vast majority of that payment (we’re talking like $1475) goes just towards paying the interest! So even after a full year of “owning” your house, you actually only have a few hundred dollars worth of house ownership.

Homeowner’s Insurance

Kind of like renter’s insurance, but a lot more money, and a lot more important. Renter’s insurance is important, but if your apartment building burns down, you don’t have to worry about rebuilding it.

Property Taxes

When you own a home, you own the land it’s on, and the land surrounding it as well (this is referred to as your lot). The city that your land is in taxes you for living there. Those taxes go towards various city services, including the school district, which often has a big impact on your taxes. Property taxes usually range from 0.5%-3% of the assessed value of your house, annually. So a $300,000 house taxed at 1% will cost you $3000 per year.

Private Mortgage Insurance

If you are using less than 20% of the home’s purchase price as your downpayment, you will have to pay private mortgage insurance, or PMI. PMI is basically the price you have to pay to the bank in order for them to feel comfortable with you purchasing a house where your actual stake is less than 20%. Once you reach 20% equity in the house, most lenders will remove the PMI.

PMI is usually about 0.8% of your mortgage cost.

Repairs

Unlike an apartment, where your dishwasher breaking means nothing more than a call to the landlord, everything that breaks in your house is your responsibility – and it’s not just the appliances you have to worry about, as you’ll soon be repairing items in your house you didn’t even know existed.

This is a tough one to estimate. One month, your microwave may break, and it’s a quick $75 to replace that. But the next month, you might find out your roof needs replacing for $15,000. I’ve read that, over the lifetime of a house, repairs tend to average about 1-4% of the house’s value per year. While you won’t be paying this cost every month, it’s very important to have this money set aside.

Utilities

Utility costs vary greatly depending on where you live, how big the house is, and the type of system it has. Generally, estimating an increase of about 15% for your electricity bill should be safe, unless your current apartment doesn’t have laundry or a dishwasher. Your heating bill is more difficult to estimate, but you can expect it to increase dramatically. You may not be using electricity in those new rooms you have, but you sure will need to heat them.

Those are all of the major additional expenses you’ll be paying when you own a home. But there are some other expenses to keep in mind as well. For example, are you moving farther from work? Be sure to factor in the additional money you’ll be paying on gas or tolls. Buying a house with a big yard and big driveway? Soon after you move in you’ll need a lawnmower and snow-blower (or snow removal service).

There are also one time costs associated with purchasing a home. Most of these are wrapped up in something called closing costs, which are the sum of the dozen or so fees you pay to banks and lawyers for assisting you with the contractual part of buying a home. You’ll also be paying a home inspector for every house you see, which usually costs between $250-$600. Lastly, if you are hiring movers, you’re looking at around $1000-$2000 in costs there (though that can definitely vary depending on your situation).

There is some good news though. You won’t pay a dime to hire someone to help you look for a house. Instead, your realtor gets paid, in essence, by the seller, who sets aside a commission for both their broker and yours. Of course, in a way you do pay for this, since the seller has to factor that into their costs when deciding on the price to sell their home, but it’s not money directly out of your pocket.

You are now familiar with all of the extra money you’ll be spending after you buy a house. In the next article, we’ll figure out if you can actually afford all of that!

How to Buy a House, Part 1: Introduction

1193074_monthly_fees_1My wife and I first started looking at houses back in October of 2008. We were casual searchers back then, browsing the occasional open house when it looked enticing enough. We couldn’t really have bought a house at that point though since our lease in our apartment didn’t even end until August 2009, but we thought it’d be good to start learning the ropes.

Turns out we didn’t have to worry about buying a house, because of the eighty or so we’ve seen in person, and the several hundred we’ve seen online, only four have interested us. Yet even of those four, none was a sure bet. The latest one was the closest, but it fell through after a dreadful property inspection. We’re currently in the last steps of the inspection process on a house we really love, but I’m not counting any chickens this time.

Buying a house is absolutely one of the biggest financial challenges I’ve faced. There are so many steps to the process, so many places to go wrong and so many places where understanding the process better or having had access to another resource would have helped immensely.

So I decided to dust off the ol’ personal finance blog and write a series of posts on the home buying experience, starting with figuring out if you can afford a home, and ending with (for the time being) closing the deal.

Part 1: Introduction
Part 2: What it Costs to Own a Home